The construction costs of the telescope will be shared and it will be located at the Harold Holt naval communications facility.

Defence Minister David Johnston says the telescope will focus on protecting satellites from space junk and will be operating in 2016.

"The US indicated they needed some southern hemisphere coverage," he told AM.

"They came to us and we said 'well, why don't we put it at Exmouth?

"And they said 'that's a good idea'. And here we are.

"Being able to navigate around this debris is a very important consideration for those that own and operate the satellites, because we've got banking and communications and weather forecasting and a whole host of things that happen."

Radio astronomy researcher professor Steven Tingay says the telescope will transmit radio waves into space, which will reflect off space debris.

"The telescope basically tracks the space junk, predicts its orbit and is there to try and help prevent collisions between the space junk and satellites," he said.

The telescope has the capacity to reach out over 36,000 kilometres.

Senator Johnston says he has no concern the telescope will be used for spying.

"No, I don't. I'm very much aware that this is for the general use of satellites that are largely civil in their output," he said.

However, Senator Johnston could not confirm whether the memorandum of understanding signed with the US has a clause specifying that the telescope will not be used for surveillance purposes.

"I don't have the document in front of me. It was a very short document. It was about the surveillance of space debris," he said.

"It doesn't look at Earth. It looks out from Earth into the outer atmosphere so that it's focused on things that are in the line of travel of satellites."

Professor Tingay says although the telescope does have the ability to be used for spying, that is not its purpose.

"Obviously surveillance of all different types can use radar techniques and listening techniques," he said.

"So broadly speaking, it's in the same class of instruments but its specific purpose is to do radar for space junk."